Buy-to-let case studies

Building a buy-to let portfolio

John Guillen, a 44 year-old solicitor from Blackheath, recently bought five rental properties on buy-to-let mortgages.

"The first thing I did was to buy Your Mortgage magazine. Then I visited a broker. Unfortunately, the first one I spoke to wasn't very helpful. After that, I looked around carefully and, in the end, I went to a big national brokerage firm called London & Country. I ended up choosing them because they give impartial advice - and they don't charge fees."

He picked an interest-only mortgage. "This means I only pay the interest on the mortgage, and don't repay the capital debt, which is more tax-efficient."

John earns a good income from his work as a solicitor so was investing purely for capital appreciation and was happy to use most of the money he earns from the tenants to meet his many mortgage repayments.

"Nothing is risk-free but so far I have seen a 15% to 20% growth in the prices of my property in just 12 months."

He chose to buy in a place that he knew well: Greenwich in London, an up-and-coming area set to undergo regeneration because of the Olympic Games. "If you buy in an area you know well, you can keep on top of the market because you know the roads that are good investments," he says. "Sometimes, an area can be going up in value but a building can be going down."

He decided not to use a letting agent. "As a solicitor, I know the legal risks involved. But I'd recommend one to others who don't know about the law."

John's advice: Dedicate some time to the process and shop around for a bargain.

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First buy-to-let mortgages

Gillian Richardson, 32, is an accountant from Wilmslow. She recently took out a buy-to-let mortgage and bought a property to rent out near her home.

"We decided to buy in our home town because we knew the area well and were aware of which areas were good investments," she says.

She chose to visit an independent financial adviser recommended by her estate agent. "He advised me to take out a mortgage with Coventry Building Society, because they had the best rate at the time."

She advises anyone considering taking out a buy-to-let mortgage to consider how they will make the mortgage repayments, should the property be empty for a short period. "My husband and I felt it would not be a problem is there was no rent coming in for a few months, because we were confident we would be able to cover the repayments from our normal income."

So far, Gillian says, her property has gone up in value solidly "far in excess of the growth we would have got by putting our money in a bank", although the pace of growth has slowed slightly in the last year.

Gillian's advice: Be a bit more cautious when it comes to a buy-to-let mortgage. Don't overstretch yourself the way you would with a residential mortgage - it's not worth it.

To find out how Gillian got on when she remortgaged her residential mortgage, see our Remortgage case studies.

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